daikin industries,ltd. · 2021. 6. 7. · support japan 03.4405.3160 north america 1.800.674.8375...

Daikin Industries,Ltd. Briefing on the Strategic Management Plan "Fusion25"

June 7, 2021

Support Japan 03.4405.3160 North America 1.800.674.8375

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Event Summary

[Company Name] Daikin Industries,Ltd.

[Company ID] 6367-QCODE

[Event Language] JPN

[Event Type] Medium-term Management Plan Announcement

[Event Name] Briefing on the Strategic Management Plan "Fusion25"

[Date] June 7, 2021

[Number of Pages] 37

[Time] 17:00 - 17:46

(Total: 46 minutes, Presentation: 46 minutes)

[Venue] Conference call and webcast

[Number of Speakers] 5

Masanori Togawa President and CEO, Member of the Board

Toshio Ashida Executive Officer, Responsible for Corporate

Planning

Hiroaki Ueda Executive Officer, General Manager of

Corporate Planning

Katsuyuki Sawai Executive Officer, Responsible for CSR

Kota Miyazumi Executive Officer, Responsible for Corporate

Communication



Presentation

Moderator: I would like to begin the briefing on the Daikin Industries, Ltd. strategic management plan, Fusion 25.

Presenting today are: Masanori Togawa, President and CEO, Member of the Board; Toshio Ashida, Executive Officer, Responsible for Corporate Planning; Hiroaki Ueda, Executive Officer, General Manager of Corporate Planning; Katsuyuki Sawai, Executive Officer, Responsible for CSR; and Kota Miyazumi, Executive Officer, Responsible for Corporate Communication. These are our 5 attendees.

Our President, Mr. Togawa, will begin the presentation, and then Mr. Ashida, our Executive Officer, will explain the details of Fusion 25. After that, we will have a question and answer session. The event is scheduled to end at 18:30.

The materials can be downloaded from the URL in the email sent to you in advance.

Now, Mr. Togawa, please.



Togawa: Thank you for participating in the Fusion 25 briefing. We will explain the details of Fusion 25 later, but before that, I would like to begin by explaining my thoughts on Fusion 25 as the top management.

We believe that our company has been able to create results and achieve growth and development through our unique FUSION management.

Under Fusion 20, we have been able to steadily implement our key strategies by thoroughly strengthening our core businesses of air conditioning, chemicals, and filters, expanding our business domain, and reforming our business structure, while also investing in future growth.

In formulating Fusion 25, we took into account the major changes in the structure of the economy, industry, and society, and looked at the changes in the world's economy and society 10 to 20 years into the future, as well as the ideal state of the Daikin Group. Based on this backcasting approach, we have set specific themes to be addressed during the 5 years of Fusion 25.

We are currently experiencing a once-in-a-century pandemic, and the COVID-19 crisis is causing unprecedented environmental changes and a dramatic transformation of the consumer structure.

In addition to geopolitical changes, we are also experiencing major structural changes in society, as the world moves toward a decarbonized society, or carbon neutrality.

How will we survive in this new normal era where such changes are the norm? I believe that a management stance and business strategy are required to win out.



In the next 5 years, we will contribute to solving environmental and social issues, while at the same time expanding our business to achieve further growth and development. Our goal this time is to realize both contributions to a sustainable society and group growth. We have set the 3 themes of our growth strategy: challenge to achieve carbon neutrality, promotion of the Solutions business connected with customers, and creating value with air.

In formulating Fusion 25, I mentioned that we would be working on a backcasting approach, starting from the future vision. When we look to the future, I think it is important to consider how the current structure of the economy, industry, and society will change and transform.

How do we perceive the change and transformation? The first major change is the growing importance of environmental and social contributions.

There are various social issues, but in particular, the corporate responsibility to reduce CO2 emissions and to decarbonize has become a major issue. As the world's only manufacturer of both air conditioning equipment and refrigerants, we have been contributing to the environment by providing differentiated products and services that take advantage of our environmental and energy-saving technologies around the world. However, we believe that it is essential to achieve both business growth and the goal of achieving net zero CO2 emissions by 2050.

The second point is that the values and needs of customers are changing more than I have said in the past, from goods to experiences and from ownership to use.

I believe that the key to future business expansion will be to aim for qualitative growth, such as how to create products and build solutions businesses that meet people's new needs.

The third point is the expanding market needs for IAQ and ventilation.

While the impact of COVID-19 has reduced the movement of people and the opportunities for people to gather, new needs are emerging as people become more aware of safety and security, and are more concerned about health and comfort. As a manufacturer specializing in air conditioning, I believe that one of our missions is to explore and create new air value, in addition to selling products that utilize our unique technologies, such as air purification and disinfection.

The fourth point is the innovative advancement of technologies such as digital, AI, 5G, robotics, et cetera, and the emergence of business models that use these latest technologies. Among them, the progress of digital technology is particularly remarkable. It is no exaggeration to say that the key to victory over our rivals lies in how we can use digital technology to transform our entire business activities.

Quantitatively speaking, our goal for 2025 is to achieve sales of JPY3.6 trillion with an average annual growth rate of 7.5%. We will aim for an operating profit margin of 12%.

On the way to achieving this goal, we are aiming for sales of JPY3.1 trillion, operating profit of JPY325 billion, and an operating profit margin of 10.5% in our mid-term implementation plan for FY2023.

With regard to carbon neutrality, we have set a quantitative target this time because we believe that it is our top priority to further accelerate our efforts to reduce greenhouse gas emissions throughout the life cycle of our products, as efforts to realize a decarbonized society are spreading worldwide.

The quantitative target for net CO2 emissions is a reduction of at least 30% in 2025 and at least 50% in 2030 compared to emissions without measures, with the base year set at 2019, the year with the highest emissions.The global air conditioning market is expected to triple in size by 2050 due to the economic



development of emerging countries. In 2018, we declared in our Environmental Vision 2050 that we aim to achieve net zero greenhouse gas emissions by 2050, and we will further strengthen our efforts in Fusion 25 to not only fulfill our social responsibilities, but also to achieve business growth, making it sustainable.

Now that I have given you an overview of the plan, I would like to talk about some of the key points for achieving this plan.

First, in terms of carbon neutrality.

One way to achieve carbon neutrality is to expand our Heat Pump Space and Water Heating business. Secondly, we will further expand sales of energy-saving devices equiped with an inverter. Thirdly, we plan to promote the use of low-GWP refrigerants, establish the refrigerant eco-cycle (recovery, reclamation and destruction), and reduce CO2 emissions during manufacturing.

In the Heat Pump Space and Water Heating business, in particular, combustion-type and electric heaters are currently the mainstream in Europe and North America, and the ratio of heat pump space and water heater is still around 10% of the market. By accelerating the shift to heat pump heaters in Europe and North America, which are our top priority regions, we plan to double our sales by FY2025 compared to FY2020.

The next step is to establish a business model for the air conditioning solutions business and further accelerate the expansion of the business.

While reinforcing the service, engineering, and other business foundations we have built to date, we will work to provide new value, such as the provision of individually optimized spaces and improvements in comfort and safety, by directly connecting with users by application and market, such as hospitals and factories, and combining the use of equipment operation data, energy management, and IAQ technology.

In addition, we would like to provide competitive solutions to reduce the electric power load by utilizing data through the promotion of connected devices that take advantage of our technological strength as an air conditioning specialist to save manpower and improve efficiency. By doing so, we would like to aim for an average annual growth rate of 9%.

In the refrigeration field, we are planning to establish a one-stop solutions business for stores that combines air conditioning and showcases to provide customers with appropriate, energy-efficient food temperature control and a safe and secure store environment. For the refrigeration solutions business, we are aiming for an average annual growth rate of 12%.

Furthermore, with regard to refrigeration, we would like to take on the challenge of building a highly profitable business model as well as solving social issues, such as reducing food loss, by connecting the cold chain from the production area to the consumption area.

In addition, we will work on establishing a large-scale IAQ and Ventilation business, which we have been working on amid the COVID-19 crisis.

Seizing the growing demand for IAQ and ventilation as an opportunity, we will create a market for air purifiers in each region of the world and challenge of selling one million units per year in each region. In addition, we will create new products and services that enrich the healthcare field and daily life, and promote collaborative creation with external parties to tackle the business of pursuing new value with air.

In order to realize these growth strategies and to use the changes of the times as opportunities to expand our business, I think it is important to invest aggressively. We are planning to invest a total of JPY800 billion over



the next 3 years, and more than JPY1.3 trillion over the next 5 years, including capital investment, R&D investment, digital investment, and investment in human resources.

In the area of capital investment and R&D centered on increasing production capacity to support business expansion in each region of the world, we would like to concentrate our resources boldly on technological areas related to our growth strategy. In addition, by strengthening our overseas R&D bases, utilizing collaborative creation inside and outside the Company, and reforming our development process utilizing digital technology, we will advance environmental technologies such as heat pumps and next-generation refrigerants, and create differentiated products one after another. Through these initiatives, we would like to contribute to the growth strategy themes and businesses I mentioned earlier.

Since it is people who drive these innovations, we believe that it is essential to acquire and develop excellent human resources, and we will continue to strengthen our efforts.

We are also planning to greatly expand our investment in digital. By expanding our digital investments, we hope to accelerate business innovation, such as the promotion of data-driven solutions business and the creation of air value.

In addition, we would like to promote process innovation that will lead to shortening development lead times, improving supply chain efficiency, and so on, in order to upgrade our management foundation.

Although M&A has not been factored into the quantitative targets for sales, profits, and investment plans I mentioned earlier, we have actively pursued M&A in the past, and I believe that this has led to positive results. Alliances, collaborations, and M&A are very important to increase the speed of our business expansion in the future, and we would like to actively promote them.

To be more specific, heating and refrigeration service companies in Europe, service and engineering companies to expand our solutions business in Asia and North America, and sales and wholesale companies to strengthen Goodman's sales network. These are the areas that we want to focus on in the next 3 years or so.

At this point, we are currently envisioning M&As totaling approximately JPY600 billion over the next 3 years. Capital investment, R&D investment, digital investment, et cetera, will amount to JPY800 billion, and M&A will amount to JPY600 billion, so for the next 3 years, we are planning to invest about JPY1.4 trillion.

I believe that it is very important to generate funds for this investment in growth, and it is essential to further strengthen the profitability of existing businesses in order to achieve sustainable growth and development for the Group.

Of these, the most urgent task is to raise the profitability of the air conditioning business in North America. I believe that we have been able to increase the competitiveness of our business in terms of sales, production, and products through the aggressive investments we have made so far, but on the other hand, we are still in the process of recovering our investments, and I think that is our challenge.

Under Fusion 25, we will strive to achieve an operating profit margin of 10% or higher in FY2025 while making further investments in growth to become the number one air-conditioner manufacturer in North America.

A US-based competitor is currently accelerating its business expansion by becoming a specialized air conditioning company. In North America, energy-saving regulations and environmental policies are expected to be strengthened, and we would like to take the initiative in changing the market by converting to inverters, heat pumps, and low-GWP refrigerants, which are our strengths.



At Goodman, we are expanding our business in the residential market and promoting the conversion to inverters by increasing sales of premium products that are energy efficient and environmentally friendly, as well as increasing productivity in Goodman’s factory in DTTP (Daikin Texas Technology Park). Then, in the Applied Business (DAA: Daikin Applied Americas), we plan to expand earnings by fully developing our solutions business in the mid-market.

I would also like to say a few words about the air conditioning business in other regions. In Japan, we are aiming to become the top company in residential, commercial, and IAQ and ventilation. Furthermore, we would like to accelerate our growth by working to expand the solutions business utilizing data.

In Europe, we will not only expand our business in all the fields of air conditioning, space and water heating, applied, and refrigeration and freezing, but also aim to become a solution provider that can meet customer needs in areas such as IAQ and energy.

In the China business, we hope to continue to maintain high profitability. China is one of the most digitally advanced countries in the world, and we have been working to build a business model that includes sales and marketing activities that utilize digital technology.

We would like to further expand sales by proposing systems that combine our unique strengths, such as the use of PROSHOP and online, with ventilation, air purification, and IAQ sensors.

In terms of production, we will aim to improve our cost competitiveness and productivity by aiming for a state-of-the-art smart factory that utilizes digital technology.

In the world, the air conditioning business in Asia is expected to have the greatest market growth. We intend to establish an overwhelming number one position in the air conditioning business in Asia. In India, we would like to expand our business in the future and make it a major base of operations, second only to China. We are planning to strengthen our local production system, sales network, product development, and R&D in order to expand sales of energy-efficient products and services while taking the lead in the market's shift to inverters and R32.

I have just shared with you my thoughts on the launch of Fusion 25.

Mr. Ashida, who is in charge of corporate planning will now continue with the details of the plan.



Ashida: I am Ashida, in charge of corporate planning. I will give an overview of our strategic management plan Fusion 25 in accordance with the presentation materials.

I will explain the 3 main points. First, the results of the strategic management plan Fusion 20 up to FY2020. Second, the goals of Fusion 25 and the medium-term implementation plan up to FY2023. Third, the outline of the key strategic themes of Fusion 25.



First, I would like to explain the results of our strategic management plan Fusion 20, which covers the period up to FY2020.

Please see page 4.

We have been working on each of the themes set forth as our key strategies, and our sales and operating profit have progressed as planned through FY2018. Despite the impact of COVID-19 from FY2019 onward, we were able to recover significantly from the FY2020 forecast of JPY150 billion in operating profit announced in May 2020 by implementing both proactive and defensive measures as well as measures to strengthen our business structure, and ended the year with JPY238.6 billion in operating profit.



Please see page 5. This is a review of the themes of business domain expansion and business structure conversion that were the focus of Fusion 20.

In the Energy Services Solutions business, we strengthened our business foundation by investing in sales and service networks and developing technologies for solution products in each region, and launched full-scale business mainly in North America, our largest market.

In the IAQ and Air Environment (AE) Engineering business, we expanded our business in response to the growing need for safe and secure air and space by upgrading our technology through technological development and demonstration tests through external collaboration.

In our efforts to lead initiatives for the environment, we formulated the Environmental Vision 2050 in 2018. We have declared that we aim to achieve net zero greenhouse gas emissions by 2050, and have accelerated the use of R32 refrigerant and high-performance energy-saving equipment. We have also started to develop next-generation refrigerants and equipment that uses them.

In the Space and Water Heating business, we established the number one share of the heat pump units market in Europe, our largest market.

In the Commercial Refrigeration business, we built a business foundation for the refrigeration solutions business in Europe, including the acquisitions of Zanotti and AHT.



Next, on page 6 is a review of the key themes for enhancement existing businesses.

In the North American Air Conditioning business, sales and market share increased through sales expansion of ducted unitary for houses, VRV, and applied equipment.

In the Asia-Oceania AC business, the residential and commercial direct expansion business established an overwhelming number one position in most countries in terms of sales.

In the Chemicals business, we achieved record profits in 2018 and made decisions on investments for the next stage of growth, including the establishment of a second plant in China and the expansion of our US plant.

In the Filter business, we established the Filter Division and have been implementing reforms to strengthen the profitability of the North America, Europe, and Power & Industrial businesses.



Page 7 shows the trend of our business performance.

This information is for reference only, and we will omit the explanation.



Next, I would like to explain our goals for FY2025 and our medium-term action implementation through FY2023.

Please see page 9.

As Mr. Togawa mentioned earlier, Fusion 25 was formulated on the premise that, based on the changes in the external circumstances surrounding our company and the unique strengths we have cultivated to date, we have backcasted our vision of the world 10 years into the future and the ideal state of our group, and have drawn up strategies to be implemented over the next 5 years.

As you can see in the upper right corner of the figure, our goal is to “offer new value for the environment and air to realize both contributions to a sustainable society and group growth.”

We aim to create value through a total of 9 key strategy themes, consisting of growth strategies, focus regions, and enhancing the management foundation.

As for growth strategies, we have set 3 themes to expand business and improve profitability while contributing to the environment and society.

In addition, we will set up focus regions to obtain investment resources for the growth strategy through accelerated global development and enhanced profitability.

In addition, we have set 5 themes to reinforce the management foundation to support business transformation and growth.



Please see page 10. This is the content of 9 key strategy themes.

First, there are 3 growth strategy themes. The first is the challenge to achieve carbon neutrality.

Since air conditioners consume a large amount of energy and use refrigerants, we believe that it is our responsibility to reduce CO2 emissions. By utilizing our strengths in energy-saving and environmental technologies, we will expand our Heat Pump Space and Water Heating business, recovery and reclamation of refrigerants, and take other steps to reduce CO2 emissions ahead of our competitors, thereby contributing to solving environmental issues and expanding our business.

Second, in the solutions business, we will strengthen our profitability by connecting with customers and providing new value. In addition to air conditioning, we will expand our solutions business to gain profits in the refrigeration field.

In the third area, the creation value with air, we will take advantage of the growing need for air safety and security in the COVID-19 crisis to establish a large-scale IAQ and ventilation business and take on the challenge of creating IAQ and AE that enrich people's lives.

In order to expand our business by investing in the 3 growth strategies I just mentioned, we need to strengthen each of our existing businesses and further increase their profitability. In particular, North America, the largest market for air conditioners, has been set as a focus region following Fusion 20. We will take the changes in the market environment, such as the review of environmental policies by the new Biden administration, as an opportunity and challenge to establish the number one position.



In addition, although not listed as a focus region, we will also work to strengthen our foundation in emerging regions such as India, Central and South America, the Middle East, and Africa. In particular, India, which has the second largest population after China, has great potential for growth, and we are planning to establish the third plant there. We aim to expand local production and strengthen our sales and service networks to become the next major base.

In addition, to support the growth and expansion of each business, we have set 5 themes to enhance the management foundation.

The first is to strengthen technology development capabilities.

The ability to develop technology is the lifeline of a manufacturer, and we will accelerate our contribution to business expansion by developing differentiated technologies and products at a faster pace than ever before through external collaboration with academia and industry as well as internal collaboration.

The second is to establish a robust supply chain.

As the risks of global decoupling and natural disasters increase, we will build a supply chain network that is resilient to emergencies and changes by utilizing our network of more than 100 production bases around the world.

The third is to promote digital transformation for innovation.

We will thoroughly promote the digitization of the entire company to create new business models using data, speed up technology development, reform manufacturing and SCM, and improve the efficiency of indirect operations.

The fourth is to create market value and enhancing advocacy activities.

As a driving force in the industry, we will participate in the creation of common global rules and the formation of international public opinion.

Lastly, we will improve HR capabilities through advanced diversity management.

In order to achieve the goals of Fusion 25, we will further refine the diversity management we have cultivated to date.



The following page 11 describes the value creation we aim to achieve.

First of all, in terms of economic value, we will once again challenge the image targets for FY2025 of JPY3.6 trillion in net sales and an operating profit margin of 12%, which were set in Fusion 20.

In terms of environmental and social value, we aim to create value based on each of the SDGs, such as “net CO2 emissions reductions” and “free humankind from heat and cold.”



Please see page 12.

The Group-wide quantitative targets for the medium-term action plan through FY2023 are net sales of JPY3.1 trillion and an operating profit margin of 10.5%. In order to further expand our business, we plan to invest over JPY800 billion over the next 3 years, mainly in 9 key strategy themes.

Furthermore, although not factored into the quantitative targets, we will actively invest in alliances, partnerships and M&A to expand business in growth strategy themes.

We will steadily implement these investments and challenge to achieve an operating profit margin of 11% or higher in FY2023.



Please see page 13.

Under Fusion 25, we aim to expand Group-wide sales by more than JPY1 trillion, of which the 3 growth strategies will account for about half, or more than JPY500 billion.

In existing businesses, we will expand by focusing on expanding sales of air conditioning equipment in each region of the world. In particular, we will focus on expanding the profitability of the AC business in North America and making India a major base of operations.



Next, I would like to explain each theme of the key group strategies.

Please see page 15.

The first of the 3 themes of the growth strategy is the challenge to achieve carbon neutrality.

In order to achieve our goal of achieving carbon neutrality by 2050, we have set 2019 as the base year and aim to reduce our net emissions of greenhouse gases converted to CO2 by at least 30% in 2025 and at least 50% in 2030, compared to what they would have been if we had grown our business without implementing any reduction measures.

We will continue to lead the industry in fulfilling our social responsibility through environmental initiatives such as the widespread use of heat pump space and water heaters and inverter units.



The 6 specific initiatives for carbon neutrality are listed on pages 16 and 17.

First, page 16.

The first point is our efforts to reduce CO2 emissions during manufacturing.

We will work to reduce energy-induced CO2, HFCs, PFCs, and other emissions in the development and production processes, and while expanding production, we will reduce CO2 emissions, aiming for zero emissions in the future.

Secondly, we are working to reduce power consumption during product use.

We will further accelerate the conversion to inverters, which we have been promoting so far, and lead other companies in energy-saving equipment. As an example, in 2025, almost all room air conditioners sold globally are expected to be inverter units.

The third point is to expand the Heat Pump Space and Water Heating business.

Utilizing heat pump technology cultivated in the AC business, we will accelerate the shift from combustion-type space and water heating systems to heat pump type. We have positioned Europe and North America, where the combustion-type products are still the main markets, as our most important regions for space and water heating, and will contribute to reducing CO2 emissions while expanding our business globally.



The fourth point is our refrigerant initiatives supporting the AC business.

We will continue to promote the shift to R32 globally, and the R32 ratio for room air conditioners is planned to exceed 95% by 2025. We will also work to build a refrigerant eco-cycle that realizes recovery, reclamation, and destruction of refrigerants. We will also promote the development of next-generation refrigerants and equipment using low-GWP refrigerants.

The fifth point is the challenge to create new environment-related business.

We will take on the challenge of themes with the potential for market expansion, such as smart cities and energy creation.

The sixth point is technology development to realize a carbon neutral society.

The shift to renewable energy sources is expected to accelerate worldwide, but it is said that CO2-emitting energy sources will still be around in 2050. We will research on leading-edge technologies on CO2 decomposition, recovery, and reuse of CO2 itself, identify technologies that will be necessary in the future, and proceed to acquire them.



Please see page 18. The second theme of the growth strategy is the promotion of the solutions business connected with customers.

First, let's talk about AC solutions.

As the air conditioning market is maturing and the market stock is expanding, we believe that the key to business expansion and profitability improvement in the AC business is to strengthen solutions by application and market in downstream areas such as maintenance, inspection and servicing.

Specifically, this includes basic services and solutions such as repair and supply of parts and materials, value-added services and solutions based on customer needs such as maintenance and servicing, IAQ diagnosis and improvements, and renewal and turnkey solutions optimized for each application and market, such as engineering that combines equipment and controls other than air conditioners. We will provide these 3 solutions and establish a business model for selling products.



Page 19 shows an example of the air conditioning solution menu.

We will reinforce proposal and response capabilities for each vertical market, and provide solutions menu satisfying diverse customer needs, including individually optimized air conditioning by managing and analyzing customer information and equipment operational data, and safeguarded spaces where air quality is visible and ventilation, disinfection, and other IAQ technologies are combined.



See page 20. Next is the refrigeration solutions.

We will expand the energy-saving and environmental technologies we have cultivated in the air conditioning field to the refrigeration field, paving the way for us to become the number one in the global refrigeration business.

First, in Europe, we will establish a store solutions business that includes appropriate food temperature control, safe and secure store environments, remote monitoring and energy management. After that, we will expand our business to other regions such as Asia and Oceania.

By connecting the entire cold chain from production to consumption, we will contribute to solving social issues such as the reduction of food loss and food safety and security, while building a highly profitable business model.



Please see page 21. The third theme of our growth strategy is to create value with air.

In response to the growing IAQ and ventilation demand due to the COVID-19 crisis, we will create a market by introducing new products such as air purifiers and Heat Reclaim Ventilation (HRV) and creating new services, aiming to establish a large-scale IAQ and ventilation business.

We hope to expand our sales to JPY290 billion in FY2023.



We will also work to create IAQ and AE that enrich people’s lives. Please see page 22.

By accumulating and analyzing air conditioner data and vital data, we aim to commercialize our products in the healthcare domain and realize air value for people to get better concentration, relaxation, and good sleep.



Please see page 23. Next is the North American AC business, which we have designated as a focus region in our key strategy.

In addition to the respective business expansions of Goodman and DAA, we will take the environmental and energy efficiency regulations that are expected to be strengthened under the Biden administration as an opportunity to promote conversion to inverters, heat pumps, and low GWP refrigerants in the market.

We aim to achieve sales of JPY800 billion in FY2023, on the way to expanding sales to the JPY1 trillion scale in FY2025 and challenging for the number one position in air conditioning in North America.



Starting on page 24, I will explain the 3 themes for strengthening our management foundation: strengthening technological development capabilities, establishing a robust supply chain, and promoting digital transformation for innovation.

First of all, in the area of technology development, we will prioritize resource allocation to 4 key domains linked with Fusion 25: 3 growth strategy domains shown on the left side of the figure, and one domain with future themes shown on the right side of the figure.

Centered on the Technology Innovation Center, which is the control tower for technology, we aim to create results by promoting technology development through projects based on internal and external collaboration.



Please see page 25.

In order to promote key themes on a global basis, we will further strengthen our overseas development bases and acquire and train human resources to promote innovation.

We will also aim to create results and implement them in society through our efforts with the University of Tokyo and Osaka University, with which we concluded a comprehensive partnership during Fusion 20.



Please see page 26. The second theme for strengthening our management foundation is to establish a robust supply chain.

In response to uncertainties such as the global supply chain disruptions and increasing decoupling on a global scale, we will work to further visualize our supply chain and improve risk avoidance through procurement by multiple companies and build a procurement supply chain to achieve local production for local consumption.

We will also aim to minimize the supply lead time and person-hours by transforming to a simultaneous integrated operation that enables the related departments to share the information of the entire supply chain and immediately make decisions on the best plan.



Lastly, we are promoting digital transformation for innovation.

In the future, in order to provide services and value suitable for diversifying needs, including air value provision and solutions business, we believe it is essential to connect with customers digitally and utilize the data obtained.

In Fusion 25, we will greatly expand our digital investments. We will build a platform for linking and analyzing data as business innovation. Furthermore, in addition to creating new products, services, and business models by acquiring equipment data, people data and building data, we will also work on process innovation, such as reforming ECM and SCM, reforming development processes, and building systems for upgrading management foundation.

We will also continue to focus on the development human resources in digital fields within the Company, mainly through the Daikin Information and Communications Technology College.

On the following pages, you will find information on regional businesses of air conditioning and major businesses other than air conditioning. I will omit the explanation, but please refer to it.

This concludes my explanation.



[END]

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Document Notes

This document has been translated by SCRIPTS Asia.



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